World Economic Magazine’s Thought Leadership Interview Series with Almonty Industries Inc.’s Mr. Lewis Black

Mr. Lewis Black, President and CEO, Almonty Industries in an interview with Ms. Grace Knight, Head of Media and PR, World Economic Magazine discusses the Impact of Omicron on Manufacturers and Suppliers. 

Grace:  Just as it appeared like the crisis was beginning to stabilize, the industry may now face yet another blow by the new omicron Covid variant. Recently in an interview with CNN Business, US Secretary of Commerce, Gina Raimondo raised her concerns on how the omicron variant will amplify the pressure on the already stressed-out global supply chain. 

In October of this year, the Biden administration moved to take steps to reduce disruptions in supply chains that are progressively impeding the flow of goods of all kinds in the United States and globally. 

So, Lewis, what is your take on this?

Lewis: Well, I don’t think there is one particular answer, I think there are many schools of thought. More often than not, the supply chains are normally predictable and at least assessable through modeling but in this particular instance, with obviously the global shutdown that occurred last year there was no way to model the impact or the ripple effect of that. As we look back, it is easy to say people were homeless with no money, factories were shut down. In these tough times, governments from various economies came to their rescue; there is all kind of rationale but ultimately all we can really do now is look back and see why something happened but looking forward of the solution is not going to be simple at all. Ultimately the market has to find the balance itself because no one government can resolve this. It is not a domestic issue, it is a global issue and every government is reacting slightly differently because they are under enormous media pressure to do so but I think if they were honest and would accept the fact that if you stop one leak, another one will occur. So, there is no straightforward solution to what is happening. The focus should be more on the inflationary impact of what’s going on; because I think that is probably much more problematic in the medium to long term than the supply chain disruptions that we are going to experience by 2022 or by 2023 when things start to re-balance itself.

Grace: Well said! It’s so true that the market has to find a balance. 

Along the same lines, Lewis, we have observed that as of 2019, the global economy has been in a downturn as a result of covid-19. During a recent hearing the US Federal Reserve Chairman Jerome Powell said that officials were surprised by the extent and impact of supply bottlenecks sparked by Covid. It has also been observed that in certain countries like Britain that fall outside the Euro-zone, more manufacturers than ever in the last 30 years, have reported growing expenses putting pressure on the Bank of England, eventually making them raise interest rates. What do you have to say about this?

Lewis: Well, this is not only UK’s problem, this is a global problem. So, if anyone thinks that they can escape this issue, they are out of their mind, it is strange enough Japan which has been in deflation for almost a generation hasn’t seeing tremendous inflation which is the kind of anomaly pretty much any other developed country is in and it is manifesting in different ways. So, I think that rising commodity prices will witness further increase even in the near future as well. They are not going to be unique to one particular sector or country; it’s going to go across the board at different rates. But ultimately it is not unique for one particular industrialized country. Even though, I am a naturalized American but I was born and bred in England. If we haven’t excused the panic, we embrace it. For instance, they have had a problem with gasoline supplies in south-east England central London. There was no shortage of gasoline, but the lack of trained truck drivers delivering the fuel.  Then, of course, there’s this “knock-on effect” impacting supply chains across the world, where people have a sense of panic and they feel they must hold and that, further, exasperates the problem as well. Ultimately supply chain issues with semiconductors in the cars and vehicles, now urea which is probably used as an additive for the diesel fuels in Australia and South Korea, pose a genuine shortage problem; but a lot of what we are seeing is also exasperated by the population out of genuine concern that it is not going to be available as well as the fact that the rising price. I suppose the Fed Chair (Mr. Jerome Powell) should look at the subject of inflation slightly more objectively. Inflation is the real enemy here because people think that the as the prices continue to rise, they are going to continue to spend and that’s a self-prophesizing problem. It is that if you continue to spend, your inflation continues to ramp up, and then, of course, what Europe should look forward to with gusto in 2022 that the unions are about to witness a widespread industrial disruption. Because the unions are going to argue that their members should have significant increases in their pay to combat inflation. And you, then, end up in a classic ‘1970’s debts spiral’ of rising costs because wages have to go up to support inflation and consumer spending continues to increase because people, obviously, want to buy before the prices go up. That is the biggest problem. Having shortages in some items until the supply chain industry disruptions in the market will find a balance.

Grace: Well said that right now the major concern is inflation that needs to be addressed.

Despite the fact that practically every industry has been severely impacted, global manufacturers appear to have remained afloat thus far despite supply chain disruptions. Do you agree with this statement? Or you see things from a different perspective.

Lewis: Yes, I think demand has been reversed. Although getting the goods to the markets has been problematic and one may, naturally, have worries about the cashflows but ultimately with so much money being pumped into the economies by various governments, that cashflow drama or concern has certainly been negated to a certain extent. They know when the goods get to the market there is an appetite for them. I don’t think the manufacturers are the reason for the rising costs to the end consumer.

Grace: Another recent report released by the Global Tungsten Industry findings state that amid the COVID-19 crisis, the global market for Tungsten estimated at 91.5 Thousand Metric Tons in the year 2020, is projected to reach a revised size of 115 Thousand Metric Tons by 2026, growing at a CAGR of 3.9% over the analysis period. Will it be the same after the entry of the new variant in the market? What do you have to say?

Lewis: I think it is a very conservative view, because ultimately what has happened in Tungsten is that Roskill reported a few months ago, it is the transition from industrial metal in the Tungsten into a technology metal because it used across pretty much every new technology that is currently being voraciously consumed from EVs to 5G to semi-conductors, you need Tungsten. Apparently, South Korea’s year-to-date data reveals that they have imported 20% more Tungsten from China than they did the previous year and that is because of the batteries, they are using them as the anodes to replace to Cobalt, for there are many advantages to Tungsten over cobalt. And I think this trend is going to continue. Again, Tungsten is a good barometer of what is happening, 83% of it is controlled by China, they produce 83% of the world’s Tungsten, you combine that with rising costs not only in developed countries but also in China and you also see a need for diversification. Perhaps we will see a lot more than 3.9% a year out of Tungsten between now and 2026. In South Korea, the battery manufacturers are at a sort of cutting edge. For example, the LGs, Samsung, the Toshiba plant, etc. This will follow up very quickly into the rest of the world. We know that China is trying to replicate the use of Tungsten, it is nanoscience fraction. But Korea is very clever. They buy the Tungsten oxide from China and then they mill it in their country so that they don’t have to share the secret sauce. But China is doing all kinds of work to try and replicate it.

Grace: Obviously, I understand that South Korea is trying to climb up the ladder as far as the chip manufacturing industry is concerned.

Lewis: Yes! Taiwan and South Korea and the US are pretty much the three main sources of the semi-conductors. They are so far in front of everyone else, no one is going to catch them any time soon. I think people don’t understand that this is really a cutting-edge stuff to produce a semi-conductor; it takes 9-weeks (approx.) to produce one semi-conductor to go through the plant is an extraordinary amount of time. But, ultimately the technology requirements to make a semi-conductor is cutting-edge of what people can achieve technically. So, you can’t just build these factories; it’s like a widget factory down on your local industrial park. These are extremely expensive, extremely advanced factories. Taiwan, South Korea, and the US are the dominant players and will continue to be so for generations in that sector.

Grace: Wow! This is truly informative as I am discovering new insights from you.

We have had a recent remark from TS Lombard, a globally renowned independent economic and investment strategy research provider. According to TS Lombard, if “omicron throws a wrench in the works on supply chain recovery, it could pose a threat to regional exports recovery.” Do you believe it will have an impact on the recovery of regional exports? and in what way?

Lewis: I think it is a question less about on the Omicron and more about governments, what is the government going to do? Omicron and its behavioural pattern in South Africa that it is, obviously, infectious but a much mild version. Of course, I tried to explain that away with South Africa saying, everyone had you know Covid already so they are immune and much of this is driven to try to get a booster or to get vaccination rates up but ultimately, it’s up to the governments how the supply chain ends up being the victim or not. Omicron itself is going to be the problem and the problem is going to be if government start acting unilaterally like they did the last time when one shuts down, like today (16^th December, 2021) France announced that they are banning anyone from Britain coming into France, because Britain’s has 78,000 infections yesterday against France is 65,000. I mean, it such absurdity! We can all go back to politically fighting with each other, between parties later. Right now, we just have to be able to stand each other long enough to work together to bring us out of this successfully. Such unilateral actions can cause absolute chaos for the supply chain. We are looking at 23 recoveries to rebalancing, but it may push it back to 24 to 25 depending on what they do. This shows how they are feeding the fire of inflation by indulging into something that actually has no real effect on the virus. This is the insanity! Thus, the damage caused to the victims of inflation are always those with the least. We have to accept at some point that all that we have now is the vaccination. They have got some great pills coming and all these antivirals, that is terrific! But now we have to crack on. Just last year the global economy experienced a big wobble. The economy, the supply chain (in particular) is not strong enough to take a second whack within 24 months, that would be harmful to its growth trajectory. 

Grace: So true! As we understand that this is the situation where in obviously the virus even though it is impacting us economically but the political inclination can’t be overlooked as we are seeking help from government across the globe now if I have to add more into this as we know for the new coronavirus strain according to US Treasury Secretary Janet Yellen, could exacerbate supply chain problems and raise inflation, but it could also depress demand and slow growth, easing off some inflationary pressures. What are your thoughts on this?

Lewis: Well, it really depends whether the governments are going to run another stimulus, that is the first question. If they don’t do so, you start to restrict the money flow, which will be positive for inflation, the downside is, of course, it will be unpopular with your base (people). Like, Turkey these days is experiencing rampant inflation on certain items, especially food items and ultimately the current government have said they have no intention of ever raising rates to counter this, which is the traditional way of dealing with inflation, you encourage saving, and discourage borrowing. When you have a government (for its own survival) taking the probably the best trodden path to control inflation off the table, you have a problem, and political survival seems to be put in front of actually what could be the best thing to do. So, I think Janet Yellen is correct, if another supply train crisis occurs you will restrict the amount of spending because you will not be able to buy what you want, but ultimately the collateral damage from that you are starting to affect the actual manufacturing chain and that is a far larger problem in the short-term. Apparently, the decisions can be in the form of mass layoffs and then, of course, the government has to subsidize for the layoffs and then you get back on to the inflationary treadmill. I think if you are relying on causing destruction with one hand and to fix something on the other hand that it is not a great strategy. Unless you handle the inflation now you are going to have a real problem. Because once the ‘Inflation Gennie’ is out of the bottle as they found out in the 70s, it was out there for a decade! I think Janet Yellen is old enough to remember the 70s but most of the Fed chairs through the US, the policymakers, they don’t have any recollection. I remember when I was 11 years in 1979 and my Mum and Dad were talking about in England the rises of pricing and everything at dinner. They were very conscious of it, very uncomfortable with it. So, there is a whole generation who have no idea about the inflation. Couple of months back, I heard someone say – ‘Oh! Inflation is not a bad thing. It just means you are going to consume less and that is going to be good for the planet.’ 

It is an extraordinary statement from somebody who has a platform (Lewis is in disagreement to the statement) to say that inflation is not bad because if things get too expensive you won’t buy it, you are not consuming it and by that, you are helping the environment. 

Inflation is a disaster. Look countries like Venezuela or any of those countries that have gone through rampant inflation, it destroys a generation. Major economies like the US, the UK, and several other European countries have been through it in the 70s. It took them a decade to recover. And so, Janet Yellen who is meant to be the smartest person on the block, in charge of fiscal policy of the US in terms of its management, can’t sit there and just hope that another crisis is going to fix this problem. You have to actually come up with perhaps a strategy that doesn’t rely on another crisis.

Grace: Well, that was some interesting information worth noting down. Finally, we would like to learn more about how Almonty industries is dealing with this Covid variant crisis so far and what kind of strategies you have laid down for the future. Please give us some more information about the company and the website details as well for our listeners to discern some useful information on the metal.

Lewis:   Well, our website is very easy, it is almonty.com, so that is very easy and we are the largest producers of tungsten concentrate outside of China. All of our customers are vertical and they supply ultimately the Airbuses, the Boeings, the apples, all the large corporations that consume both technical and industrial parts. In terms of a local level, how we are dealing with what is going on is that we are going to return very shortly to our reduced ratios of workers. We cut about 20%, so we can maintain social distancing in the underground mines. It is not that I am worried that the variant is more aggressive in terms of fatality rate, but I am concerned if anyone in the team that has been exposed to Covid they are mandatorily quarantined and that can create chaos. So, we are taking proactive steps right now to maintain social distancing, we still do testing every week. We don’t make vaccines mandatory. I believe very much in vaccines. I think it’s incredible feat of the industry to have come up with a vaccine so quickly, but at the same time, I still hold on to this belief that whether we like it or not, it is their choice to get vaccinated or not. Ultimately, they know the alternatives- with vaccine they would be okay and without it, you may have a problem. So, we don’t make it mandatory. But what we find within our company is that generally, people feel comfortable with taking the vaccine we have not seen anyone that objected to the policy, but it is not been a policy of the company to make it mandatory. All we can really do is just essentially prepare for the worst. (Remember that the omicron is a wonderful gift to many governments because it allows everyone to look at something else). So let us hope we get through this successfully as we don’t have anybody to handle the wheel at the moment. Companies just have to take responsible actions to protect the people who work in the company, that is the most we can do. 

Grace: Great. A lot has been discussed and shared over this topic today. Thank you so much for taking the time to connect with us. This is where we’ll end the interview today. It was a fantastic session.